Lead
Bernstein reiterated an Outperform rating on Hershey Co. and kept a $84.00 price target as the chocolate maker continues to contend with swings in cocoa costs. The stock is trading at $191.35 and, according to InvestingPro data cited in the analysis, sits close to its calculated Fair Value.
Cocoa price path and cost assumptions
The research note lays out a staged view of cocoa price inflation across several years. Bernstein estimates cocoa averaged $2,500 to $3,000 per metric ton in 2023 - a level that represented roughly 15% of Hershey's cost of goods sold. The firm models a rise to $3,000 to $3,500 in 2024 and a further jump to $5,000 to $5,500 in 2025, at which point cocoa would likely account for about 23% of the company's COGS.
InvestingPro data included in the briefing shows Hershey's current cost of goods sold at $7.15 billion and a gross profit margin of 37.73%.
Profitability and EPS expectations
Bernstein highlights a divergence between company commentary and its own modeling. Hershey has previously indicated that if cocoa costs revert to 2024 levels, fiscal 2026 earnings per share could rise back toward roughly $10. Bernstein calls that scenario likely overoptimistic, noting it does not fully account for operational deleveraging that would accompany the volume declines expected after the double-digit price increases Hershey implemented through 2025.
For context, current diluted EPS stands at $6.69, and analysts are forecasting $6.01 for fiscal year 2025. Consensus expectations assume COGS fall from $7.6 billion in the current year to $7.3 billion in 2026, a move that would support margin improvement and about 17.5% EPS growth. Bernstein, by contrast, models 2026 EPS at $6.61 - below the consensus of $7.04. InvestingPro notes five analysts have recently revised their earnings estimates higher for the upcoming period.
Volume risks and additional headwinds
The firm flags several demand-side risks that contribute to its more cautious stance. Those include adoption of GLP-1 drugs, media focus on MAHA regulatory initiatives, and restrictions tied to SNAP benefits. Bernstein acknowledges that recent price increases and a potential decline in cocoa input costs could help margins, but emphasizes offsetting pressures from volume erosion.
Despite these challenges, Hershey's balance sheet shows liquidity where liquid assets exceed short-term obligations, and the company has sustained dividend payments for 55 consecutive years, with the current yield at 2.87%.
Other analyst moves and governance updates
Several other brokerages have recently adjusted their views on Hershey. Piper Sandler upgraded the stock to Overweight, citing cocoa-cost relief and the removal of tariffs as factors that could free cash to reinvest and boost EPS. Wells Fargo moved Hershey from Underweight to Equal Weight, pointing to a better margin outlook driven by expected cocoa price easing. Morgan Stanley also upgraded the stock to Overweight, highlighting potential for EPS acceleration that could outpace consensus.
Separately, Hershey amended corporate bylaws effective immediately to clarify board leadership and governance roles. The changes removed language that allowed Michele Buck to serve as Chairman of the Board and eliminated references to the Lead Independent Director, aligning the bylaws with prior provisions requiring the Chairman to be selected from independent directors.
Bottom line
Bernstein retains an Outperform rating but takes a more guarded view on 2026 EPS given its cocoa price path and anticipated operational deleveraging from volume declines after large price increases. The company retains solid liquidity and a long record of dividend payments, while multiple brokerages have moved to more positive stances as cocoa-cost relief and tariff removals factor into their models.
For readers seeking the full datasets and model details referenced in this note, InvestingPro provides expanded analysis, including Hershey's Pro Research Report and earnings estimate revisions.